2020 Health FSA, QSEHRA, and Transportation Amounts Released

Federal 

The IRS has released the 2020 inflation-adjusted amounts for health FSAs, QSEHRAs, and Qualified Transportation Fringe Benefit Plans in Revenue Procedure 2019-44. 

Health Flexible Spending Arrangement 

For 2020, employees can contribute up to $2,750 to their health FSAs, up from the 2019 limit of $2,700. The increase also applies to limited-purpose FSAs. 

Employers interested in adopting the new contribution amounts should review their health FSA plan documents to determine if a plan amendment must be done. The increase should also be communicated to employees during open enrollment and be included on any enrollment materials. 

Due to the late release of this information, employers that have already gone through open enrollment will need to determine if they will hold a limited open enrollment to permit employees to take advantage of the new FSA amounts. 

Qualified Transportation Fringe Benefit Plan 

For 2020, employees can contribute up to $270/month towards commuter and transit benefits and $270/month towards qualified parking benefits. This is a $5 increase for both types over 2019 amounts. 

Employers interested in adopting the new contribution amounts should review their qualified transportation fringe benefit plan documents to determine if a plan amendment must be done. The increase should also be communicated to employees during open enrollment and be included on any enrollment materials. 

Qualified Small Employer Health Reimbursement Arrangement (QSEHRA) 

For 2020, employers will be able to reimburse up to $5,250 for single coverage and $10,600 for family coverages under a QSEHRA. This is a $100 increase for single coverage and a $150 increase for family coverage. 

Employers looking to adopt the new reimbursement limits should review their QSEHRA plan document to determine if an amendment needs to be done. Employers sponsoring a QSEHRA with a 1/1/2020 effective date who wish to utilize these new amounts but have already sent out the required employee notice, should send an amended notice to employees. 

Thank you for choosing Paylocity as your Payroll Tax and HCM partner. 

This information is provided as a courtesy, may change and is not intended as legal or tax guidance. Employers with questions or concerns outside the scope of a Payroll Service Provider are encouraged to seek the advice of a qualified CPA, Tax Attorney or Advisor.